Indonesia’s largest welded steel pipe manufacturer PT Steel Pipe Industry (Spindo) issued the country’s first local currency sustainability-linked bond (SLB) amounting to one trillion rupiah (US$61.75 million) on the back of a guarantee extended by Credit Guarantee and Investment Facility (CGIF), a trust fund of the Asian Development Bank (ADB).
Listed in the Indonesia Stock Exchange (IDX) on July 10, the transaction represents a significant milestone for sustainable financing in Indonesia.
Rated idAAA (cg) by Pefindo, the SLB was issued on July 9 with a coupon rate of 7% per annum for the three-year tranche and 7.35% per annum for both the five-year tranche and the seven-year tranche with stronger investors’ demand for the longer tenors. The proceeds will be used for the development of Spindo’s new warehouse, working capital and refinancing of existing debt facilities.
PT Indo Premier Sekuritas, PT BCA Sekuritas, PT Korea Investment and Sekuritas Indonesia, and PT Sucor Sekuritas were the joint lead underwriters for the transaction.
CGIF chief executive officer Hongwei Wang says the trust fund’s inaugural SLB guarantee in Indonesia demonstrates its commitment to supporting the development of the country’s thematic bond market. “This transaction will diversify Spindo’s funding sources and improve their overall debt duration as well as the overall cost of funding as part of their company strategy,” he adds.
Spindo chief strategy officer Johanes Edward says the issuance of Indonesia’s first rupiah-denominated SLB manifests the company’s commitment towards sustainability development goals. It also expands its investor universe and enhances its financial structure by extending the funding duration.
Rayendra Tobing, director and head of investment banking at PT Indo Premier Sekuritas, says the deal fosters innovation in the Indonesian capital markets. “We hope that this initiative will inspire other prospective issuers to consider sustainable financing products, thereby cultivating a more resilient and environmentally responsible bond market in Indonesia,” he points out.
Luthfi Andhika, group head of capital market at PT Korea Investment and Sekuritas Indonesia, adds: “We hope this initiative will catalyze future thematic bond issuances in Indonesia, making such bonds a compelling financing option for companies and providing diversification for investors' portfolios. We eagerly anticipate a rise in thematic bond issuances and the continued presence of CGIF in the Indonesian bond market.”
Spindo was established in 1971 with a production capacity of around 600,000 tonnes per year. It operates six units in East Java and West Java. More than 60% of the company’s products are used in infrastructure, telecommunications, mining, petrochemicals, construction and utilities, while the remainder is used in the oil and gas sector, automotive industry and furniture.
Spindo is classified as a blue company in terms of environmental aspects – meaning it complies with environmental regulations in Indonesia.
The deal is the second local currency-denominated SLB guaranteed by CGIF in less than a month. In June, it guaranteed the S$100 million (US$74 million) SLB issued by Sabana Industrial Real Estate Investment Trust. This offering represented CGIF’s first-ever guarantee for an SLB.
